Thai Recovery Fund focuses on SMEs

Johannes Simbolon, The Jakarta Post, Jakarta

To many people, it remains unclear what the Indonesian Recovery Fund, which was announced by the government last week, will look like and what it will focus on, as the government has yet to provide the details.

But, the Thai Recovery Fund, which Minister of Industry and Trade Rini M. Soewandi referred to as a model while announcing the new funding scheme on Friday, has a clear focus: small and medium enterprises.

Documents from various organizations available on the Internet reveal that Thailand, which was the first country in the region to be hit by the economic crisis in 1997, has launched at least two funding schemes bearing the name Thai Recovery Fund.

The first fund worth US$150 million, called the Thailand Corporate Recovery Fund, was initiated by former U.S. Vice President Dan Quayle at the fourth annual meeting of the Thailand-U.S. Business Council and U.S.- Thailand Business Council.

U.S. investment firm Cerberus Capital Management contributed $87.5 million to the fund, while the remaining amount was provided by the Japan Bank for International Cooperation (JBIC) ($25 million) and the Shinsei Bank ($37.5 million).

The fund, managed by Cerberus, focussed on medium-sized firms in the tourism and agribusiness sectors that were in need of equity to help restructure their operations.

The second fund, called the Thai Recovery Fund, was announced last year by Thailand's Ministry of Finance, with contributors including the Asian Development Bank (ADB), JBIC, KreditAnstalt fuer Wiederaufbau (KfW) of Germany and U.S.-based money manager State Street Corporation. State Street became the manager of the fund.

ADB signed an agreement with the Thai government to invest $50 million in the fund, or 25 percent of the total fund, in March of this year.

The fund was aimed at spurring small and medium enterprises, the ADB said in a statement available at its website.

"The Fund's investment in Thai medium-scale private sector companies will help restructure these companies by reducing their current high debt-to-equity ratios to more prudent levels. This will enable many of these companies to make a financial recovery and return to profitability," Christine Wallich, head of ADB's private sector group, said.

Few documents are available describing the operation of the funds and their performance.

But, Thailand's leading English language newspaper The Bangkok Post was silent about the funds in its 2000 year-end economic review.

The paper said that small and medium enterprises, which represent 80 percent of Thailand's industrial producers and account for 70 percent of all employment, remained in the doldrums last year.

"Government attempts to revive the economy have not helped small firms to the extent expected. Most remain short of working capital and unable to service their debts. To survive, they had no choice but to continue to lay off workers," the paper said.